Column: Few Blame True Causes For Oil Woes
This story was written by Andrew Vickers, Daily Texan
To hear the so-called experts in Congress and the press tell it, the skyrocketing price of oil and gasoline over the last year has many fathers. Republicans blame environmental restrictions and drilling bans, while Democrats are happier to point the finger at "greedy" oil companies and despotic foreign governments. And almost everyone, or at least everyone with a campaigning horse in the race, is quick to jump on the back of oil "speculators" who allegedly drive up the price of oil through their massive "commodity-futures" buying spree of the last five years.
But surprisingly few are placing the blame where it really belongs - on the exploding demand for petroleum from the developing world and economic mismanagement of epic proportions by the Bush administration.
Though there is little that can be done to curb the economic ambition and thirst for energy in China, India et al., the next president will have a chance to undo a small - but important - part of the damage done by the Bush administration by reining in the country's spending and balancing the budget.
When President Bush rode into Washington, D.C. in 2001, he saw the budget surpluses built up during the Clinton administration and declared them unsatisfactory. Even as most indicators showed the economy faltering, Bush pushed through a first round of tax cuts that helped all of the Clinton-era millionaires keep their money in the new millennium. As a result, tax revenues took a predictable hit versus government spending, and the federal government again operated comfortably where it had been since 1969 - in the red. But post-9/11 and Bush's war on terror/Iraq, government expenditures exploded. The national debt inflated while we tried to exert our will in a region that has been ungovernable since the days of Alexander the Great.
To finance our record budget and trade deficits, our government was forced to borrow from other countries (in the forms of treasury bonds, mostly). For the largest, strongest economy in the world, finding lenders had never been a problem - until the Euro emerged as formidable rival in the economic game. Not coincidentally, the adaptation and success of the Euro starting in 2002 was a direct result of American largesse. For the first time since the fall of the Soviet Union, people saw the U.S. as economically vulnerable. Our massive levels of personal and governmental debt could only be repaid by a booming economy, which we did not see in the dark years following 9/11.
Consequently, countries like China, Russia and Saudi Arabia began hedging their bets by buying increasingly-secure Euros instead of dollars. And as former Federal Reserve Chairman Alan Greenspan scrambled to keep interest rates in America low in an attempt to stimulate the faltering economy, the return on U.S. bonds became even less lucrative compared to the Euro.
Naturally, this significant change in demand led to dollar-depreciation, meaning Americans paid more for goods and services in the global market, including America's favorite foreign commodity - oil.
Thus, the price of oil is yet another problem we can throw on the doorstep of George W. Bush. Fortunately we have a republican candidate eager to disassociate with the failures of the past eight years. On July 7, Sen. John McCain announced that he would balance the federal budget before the end of his first term. And though Democrats (and their pesky, Ivy-League economists) scoff at McCain's pledge to balance the budget and cut taxes at the same time, his promise is a step in the right direction for American fiscal responsibility.
As expert after expert predicts the imminent decline of America's global domination, we need to recognize that the time has passed when we could rely on an invulnerabe economy to sober our drunken spending habits. As our banks and large manufacturers start faltering in the cutthroat world of globalized markets, our line of credit with foreign lenders will soon begin to dry up. Our only hope is that we can restore the economy before the world decides to come collect.